SEC News Flash From Stubbs Alderton & Markiles, LLP – SEC Clarifies That Social Media Outlets Can Be Used For Company Announcements If Investors Are Alerted

On April 2, 2013, the Securities and Exchange Commission (SEC) issued a report (Report of Investigation) on its investigation of Netflix, Inc. (Netflix) and its CEO, Reed Hastings (Hastings), which clarifies the SEC’s position that companies can use social media outlets like Facebook and Twitter to disseminate material, non-public information in compliance with Regulation FD so long as companies first alert investors about which social media will be used for this purpose.

The SEC’s Division of Enforcement had investigated whether Netflix and Hastings violated Regulation FD when Hasting’s used his personal Facebook page, on July 3, 2012, to announce that Netflix had streamed 1 billion hours of content in the month of June. Netflix did not otherwise publicly disclose this information to investors. Neither Hastings nor Netflix had previously used Hasting’s Facebook page to announce Netflix metrics, nor were investors alerted that Hastings’ personal Facebook page might be used for this purpose. Netflix’s stock price rose considerably following the announcement.

In its Report of Investigation, the SEC concluded that its August 2008 Guidance on the Use of Company Web Sites (2008 Guidance), though largely focused on the use of web sites, its equally applicable to current and evolving social media channels of corporate communication. As discussed in the 2008 Guidance, companies must take steps sufficient to alert investors and the market to the web sites, social media outlets and other communication channels the company will use to disseminate material, non-public information.